2024 2026 2027 serves are expected to produce coals with average heating values no greater than 5200 kcal/kg (with economical washing levels). These heating values are well below the 6000 kcal/kg benchmark used in the international coal market for the last 50 years. Even after accounting for the difference in heating value, on a comparative 0 7 15 25 energy basis, since 2012 Indonesian coal prices have traded at a 15-40 per cent discount compared with premium coals. This goes straight to the bottom line of a power plant’s balance sheet. Since fuel makes up 75-85 per cent of the operating cost of a large power plant, the economic benefits of using low quality fuels are hard to ignore. Amec Foster Wheeler also notes that the steady decline in heating value of Indonesian export coals is a trend it expects to continue well into the future. Typically, as coal mines mature, mining operations move to lower quality coal seams. To save cost and reduce coal waste pile-up, mining companies will sell the higher ash and moisture fuels to the market at very attractive discounts which has been the driving trend behind the strongly growing low grade coal market. Giglio notes: “We are seeing the growing use of low quality fuels in several domestic markets as well, where low quality coals and lignites play a major role in power production. For example, 38 per cent of Turkey’s solid fuel power capacity utilises low quality lignite, sub-bituminous and waste coals, while in Germany and the US this number grows to 45 per cent and 49 per cent, respectively. Today, nearly all new-build coal projects in Turkey will solely utilise low quality Turkish lignite” Better economics, lower fuel price volatility and higher fuel supply security is also driving the use of low rank coals, lignites and petroleum cokes for power production in India, China, Indonesia, Philippines, Australia, and South Africa. Further, the use of biomass for power production is growing in many countries as the world moves to reduce net carbon emissions and meet future global warming targets. This trend is not expected to change anytime soon argues Giglio. Instead, he says, it looks to be a permanent shift toward a more flexible solid fuel market, where buyers and sellers will trade fuel quality for price, very similar to many other commodity and finished goods markets. In addition to fuel flexibility, CFBs also provide emission flexibility – an important consideration as emission regulations continue to tighten in nearly all countries. A CFB boiler can achieve low air emissions without post combustion SCR NOx and FGD SOx control saving significant plant construction and operating cost over the lifetime of the power plant. According to Amec Foster Wheeler’s calculations, the CFB can deliver over four times the value to plant owners on life cycle cost as compared to PC boiler technology. Economics are also improved by higher availability (when considering both planned and unplanned downtime) as a result of their ability to burn a wider range of fuels, argues Amec Foster Wheeler. The company’s calculations show that plants with Amec Foster Wheeler CFBs had about a 5 per cent higher availability than the PC plants. This higher availability difference was maintained for even brown coals and lignites, which can translate to over a $250 million NPV gain in net income over the life of a 600 MWe power plant. A CFB’s ability to burn a broad range of fuels is due to its flameless, low-temperature combustion process at the heart of the technology. Unlike conventional PC or oil/gas boilers, Special Technology Supplement 2006 2007 2009 2010 into its own. Conventional PC boilers have trouble accepting off-spec fuels due to their narrow fuel specs typically calling for heating values above 5500 kcal/kg, ash and moisture levels below 30-35 per cent, and volatilities above 20 per cent. Such a power plant with a narrow fuel spec could be competitively disadvantaged by a higher average fuel cost, limiting its dispatch and financial return. Fuel cost represents 70-80 per cent of a coal plant’s running costs. CFB technology, however, is capable of burning both the worst and best coals and lignites with heating values ranging from 1000 to 8500 kcal/kg, ash and moisture levels as high as 60 per cent, and volatilities down to 5 per cent. This fuel flexibility can deliver huge operating cost savings over the life of a power plant. “There are many great examples of this,” noted Giglio. “Cleco Power’s Madison plant on the Gulf Coast in the US has a 600 MW CFB unit. They shop the market – they buy petcoke at huge discounts when the price is right. If coal prices drop, they buy coal. The plant has the highest capacity factor in their fleet and it’s the first plant dispatched on the system because it’s the cheapest to operate.” Citing the Samcheok project, he said: “The reason KOSPO built a CFB project as big and advanced as that plant, is exactly for the reasons we are talking about. Korea has very little indigenous energy resources and has to import all its coal, which could really hurt the economy when coal prices rise. So they’re building the plant on the coast giving them the ability to buy the most economical fuels on the market, as opposed to building a PC and having to burn 2014 2015 2022 premium quality coal.” He added: “PCs can be designed to burn low quality coals and lignites. However, if they deviate from their narrow fuel range, boiler operational and maintenance issues rise significantly. A CFB greatly removes this fuel restriction giving plant owners the freedom to capture huge savings in fuel cost offered in the market today and in the future” It is no coincidence, therefore, that the growing number of large, utilityscale CFB power plant references comes at a time that is seeing a declining quality in internationally traded coals. During the last decade, the global coal trading market has seen some interesting trends. Most notably, since 2005, Indonesian coal exports have grown faster than coal exports from all other countries combined, nearly quadrupling to over 400 million metric tons over the last few years and projections show Indonesia maintaining its dominant position in the world’s global coal market over the long term. “Indonesia coal exports are going off the chart compared to other premium coal exporters such as Australia, Russia and South Africa, whose coal exports are flat,” noted Giglio. “This is because Indonesia is selling its coal at deep discounts. Even after you factor in their lower heating values, you still end up with a big discount to a plant operating cost.” The primary driver for the ballooning of Indonesian coal trading is simple economics. Today about 50 per cent of Indonesian coal exports consists of high-moisture, sub-bituminous coals with gross-as-received (GAR) higher heating values ranging between 3900-4200 kcal/kg. Further, the best quality Indonesian coal re- THE ENERGY INDUSTRY TIMES - OCTOBER 2016 2005 2008 2011 2012 2013 2017 2018 2019 2020 2021 2023 2025 2028 2029 2030 2016 500 450 400 350 300 250 200 150 100 50 0 Total Coal Exports (million metric tons) Indonesia Australia Russia Colombia South Africa 450 400 350 300 250 200 150 100 50 0 Base 70 $/tonne (5500 kcal/kg) -10 60 $/tonne (5000 kcal/kg) -20 50 $/tonne (4500 kcal/kg) -30 382 40 $/tonne (4000 kcal/kg) 102 226 Annual Savings (M$/yr) 30 year NPV Savings (M$) Average CV (gar) of coal export from Indonesia Source : Marketing, Sales and Logistics Analyst, Banpu PCL, GAR = Gross as received Coal quality typically declines as coal mines age which can impact output, maintenance and reliability of PC power plants Calorific value (kcal/kg) 5,400 5,300 5,200 5,100 5,000 4,900 4,800 4,700 4,600 4,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Global coal exports. Since 2005, Indonesian coal exports have grown faster than coal exports from all other countries combined. Source: IHS Savings in plant operating cost that can be realised for a 600 MWe coal plant by buying discounted lower quality fuels There has been a steady decline in the average gross heating value of Indonesian coal exports – a trend that is expected to continue into the future. Source: Banpu PCL
Energy Industry Times October 2016
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